By Sumeet Chatterjee
In 2004, Khitish Kumar Pandey took 10,000 rupees ($150) out of his pension and put it into a savings plan run by India’s embattled Sahara conglomerate. The Sahara agent told him his money would triple in 10 years.
Sahara India Pariwar had become one of India’s most successful companies over the past three decades by turning tiny deposits into dreams for small farmers, rickshaw pullers and food vendors with little financial knowledge.
But when Pandey went to the Sahara ranch to redeem his deposit, the office told him he could have 15,000 rupees immediately — if he agreed to transfer the remaining 15,000 rupees he was owed to Humara India Credit Cooperative Society Ltd.
Humara is a new Sahara fund-raising vehicle with operational ties to the conglomerate, according to investor documents reviewed by Reuters and interviews with Sahara agents in different parts of India.
Sahara and its founder Subrata Roy have been under scrutiny for years over its financial products, including for possible money laundering. Roy has built a vast empire from his small deposit schemes. But he has spent the last 21 months in New Delhi’s Tihar Jail for not complying with a Supreme Court order to return 360bn rupees ($5.4bn) to investors who put money in a 2008-11 Sahara time deposit plan.
The Supreme Court said the 2008-11 plan violated market disclosure regulations on raising capital, including failure to file a prospectus — a legal document that provides details about a financial product for investors — with the markets regulator.
Like Sahara’s now banned 2008-11 scheme, the new deposit plans are sold through the group’s network of agents across the country. They collect deposits from investors for a fixed period of time and promise to return the money at interest rates higher than what banks offer.
Sahara agents and branch officials are trying to get investors in older Sahara savings plans to switch into the new credit cooperative schemes.
Sajan Poovayya, a founder of Bangalore-based law firm Poovayya & Co, says Sahara could be violating the law if it is forcing investors to convert their maturing deposits into a credit cooperative plan.
Most of the nearly two dozen investors in the old Sahara plans stopped short of accusing the conglomerate of forcing them to convert their plans. But they said Sahara officials refused to allow them to redeem their matured deposits until they agreed to do so.
In at least one case, the investor claimed her money had been transferred from her old Sahara plan to a new credit cooperative society despite her opposition.
Most of the savings certificates investors showed make no mention of the maturity date or the interest to be paid on maturity. Such omissions violate Indian laws requiring companies that run savings deposit plans to clearly mention all the terms, said Ramanand Mundkur, managing partner of Mundkur Law Partners.
A few certificates did state that investors could expect an interest rate of 10-15 percent for a one-year deposit. That compares to 7-8.5 percent offered by commercial banks.
Vimal Kumar Sinha, the head of Sahara’s Patna operations, said some recent Sahara payments to customers were delayed because of difficulties the company faced as a result of the Supreme Court case.
He said some Sahara agents were probably coaxing investors to convert their savings into another financial plan without the company’s knowledge.
Sahara turned to credit cooperatives mainly because of their relatively weak oversight, said current and former senior Sahara employees. Those that operate across state lines are registered not with the central bank but with the credit cooperatives division at the Ministry of Agriculture.
The first of the Sahara credit cooperatives, Sahara Credit Cooperative Society Ltd, was set up in 2010, around the time when India’s markets regulator started investigating the Sahara bond scheme the Supreme Court would later declare illegal.
Sahara has started three more credit cooperatives since January 2014: Humara India Credit Cooperative Society, Stars Multipurpose Cooperative Society and Saharayn E-Multipurpose Society.
The credit cooperatives division said it had asked for an explanation from Sahara Credit Cooperative Society after receiving complaints of non-payment from investors. The division said it had not received a response from Sahara Credit Cooperative Society.
Pressuring investors to transfer their deposits from older Sahara financial plans to a credit cooperative is against regulations, a senior official at the credit cooperatives division said.
While most credit cooperatives are owned by their members, Sahara’s credit cooperatives have operational links to the conglomerate, according to investment documents from Sahara’s customers and data at the ministry of corporate affairs.
Sahara’s recent moves to raise fresh money through cooperatives has increased by $2bn the amount of money it owes its investors when their plans mature, according to two senior Sahara employees.
The total has now grown to $7.5bn — and includes the $5.4bn the Supreme Court has ordered Sahara to repay investors from the 2008-11 scheme, the senior Sahara employees said.
This disclosure contradicts what the company has told the Supreme Court: that it has already repaid 95 percent of its roughly 30 million investors in the 2008-11 scheme.
“It was always a one-man show at Sahara,” said Kundanlal Sahgal, a Sahara agent in Patna who has stopped trying to sell the new deposit schemes because he is being badgered by people asking for their money and because Sahara has stopped paying him commissions.
“Now that the man has gone to jail everything has come to a standstill and no one knows what will happen to the investors or the agents like us,” Sahgal said.
Reuters
By Sumeet Chatterjee
In 2004, Khitish Kumar Pandey took 10,000 rupees ($150) out of his pension and put it into a savings plan run by India’s embattled Sahara conglomerate. The Sahara agent told him his money would triple in 10 years.
Sahara India Pariwar had become one of India’s most successful companies over the past three decades by turning tiny deposits into dreams for small farmers, rickshaw pullers and food vendors with little financial knowledge.
But when Pandey went to the Sahara ranch to redeem his deposit, the office told him he could have 15,000 rupees immediately — if he agreed to transfer the remaining 15,000 rupees he was owed to Humara India Credit Cooperative Society Ltd.
Humara is a new Sahara fund-raising vehicle with operational ties to the conglomerate, according to investor documents reviewed by Reuters and interviews with Sahara agents in different parts of India.
Sahara and its founder Subrata Roy have been under scrutiny for years over its financial products, including for possible money laundering. Roy has built a vast empire from his small deposit schemes. But he has spent the last 21 months in New Delhi’s Tihar Jail for not complying with a Supreme Court order to return 360bn rupees ($5.4bn) to investors who put money in a 2008-11 Sahara time deposit plan.
The Supreme Court said the 2008-11 plan violated market disclosure regulations on raising capital, including failure to file a prospectus — a legal document that provides details about a financial product for investors — with the markets regulator.
Like Sahara’s now banned 2008-11 scheme, the new deposit plans are sold through the group’s network of agents across the country. They collect deposits from investors for a fixed period of time and promise to return the money at interest rates higher than what banks offer.
Sahara agents and branch officials are trying to get investors in older Sahara savings plans to switch into the new credit cooperative schemes.
Sajan Poovayya, a founder of Bangalore-based law firm Poovayya & Co, says Sahara could be violating the law if it is forcing investors to convert their maturing deposits into a credit cooperative plan.
Most of the nearly two dozen investors in the old Sahara plans stopped short of accusing the conglomerate of forcing them to convert their plans. But they said Sahara officials refused to allow them to redeem their matured deposits until they agreed to do so.
In at least one case, the investor claimed her money had been transferred from her old Sahara plan to a new credit cooperative society despite her opposition.
Most of the savings certificates investors showed make no mention of the maturity date or the interest to be paid on maturity. Such omissions violate Indian laws requiring companies that run savings deposit plans to clearly mention all the terms, said Ramanand Mundkur, managing partner of Mundkur Law Partners.
A few certificates did state that investors could expect an interest rate of 10-15 percent for a one-year deposit. That compares to 7-8.5 percent offered by commercial banks.
Vimal Kumar Sinha, the head of Sahara’s Patna operations, said some recent Sahara payments to customers were delayed because of difficulties the company faced as a result of the Supreme Court case.
He said some Sahara agents were probably coaxing investors to convert their savings into another financial plan without the company’s knowledge.
Sahara turned to credit cooperatives mainly because of their relatively weak oversight, said current and former senior Sahara employees. Those that operate across state lines are registered not with the central bank but with the credit cooperatives division at the Ministry of Agriculture.
The first of the Sahara credit cooperatives, Sahara Credit Cooperative Society Ltd, was set up in 2010, around the time when India’s markets regulator started investigating the Sahara bond scheme the Supreme Court would later declare illegal.
Sahara has started three more credit cooperatives since January 2014: Humara India Credit Cooperative Society, Stars Multipurpose Cooperative Society and Saharayn E-Multipurpose Society.
The credit cooperatives division said it had asked for an explanation from Sahara Credit Cooperative Society after receiving complaints of non-payment from investors. The division said it had not received a response from Sahara Credit Cooperative Society.
Pressuring investors to transfer their deposits from older Sahara financial plans to a credit cooperative is against regulations, a senior official at the credit cooperatives division said.
While most credit cooperatives are owned by their members, Sahara’s credit cooperatives have operational links to the conglomerate, according to investment documents from Sahara’s customers and data at the ministry of corporate affairs.
Sahara’s recent moves to raise fresh money through cooperatives has increased by $2bn the amount of money it owes its investors when their plans mature, according to two senior Sahara employees.
The total has now grown to $7.5bn — and includes the $5.4bn the Supreme Court has ordered Sahara to repay investors from the 2008-11 scheme, the senior Sahara employees said.
This disclosure contradicts what the company has told the Supreme Court: that it has already repaid 95 percent of its roughly 30 million investors in the 2008-11 scheme.
“It was always a one-man show at Sahara,” said Kundanlal Sahgal, a Sahara agent in Patna who has stopped trying to sell the new deposit schemes because he is being badgered by people asking for their money and because Sahara has stopped paying him commissions.
“Now that the man has gone to jail everything has come to a standstill and no one knows what will happen to the investors or the agents like us,” Sahgal said.
Reuters
